Why open a startup in Singapore?

Singapore, described as the “Smart Nation“, is a territory that, since 1965, wants to be one of the most advanced on smart cities. It has been making huge investments since 2014 in sensor deployments, Big data, and in order to develop the culture of entrepreneurship and innovation. This attractive dynamic pushes investors and business leaders to develop their activities in this territory. Indeed, Singapore is a real hub and gateway to the Asian market, Singapore is positioned as a key place for financial technologies and a pioneer in innovation. The City-State, then 4th largest financial center in the world behind London, New York and Hong Kong, is propelling companies and investors in the business world. Singapore has the largest concentration of FinTech startups (>490 FinTech startups) and incubator/innovation hubs (>50) in Southeast Asia. In a highly competitive environment, startups need to surround themselves with the best experts with in-depth knowledge of the market and regulations.

Moreover, Singapore is poised to replace Hong Kong as a regional hub around Fin tech and logistics. Its exceptional maritime location has contributed to its economic growth, and it is now the second largest port in the world in terms of exports and maritime traffic (after Shanghai). Secondly, the public authorities support innovation and entrepreneurship with large subsidies of up to 50% of the investments made, and this without any counterparts. On average, 60% of investments are made by international funds and 75% of the funding invested by funds in ASEAN is in Singapore.

But the government is also extremely proactive in terms of regulation so that it does not hinder innovation, but rather stimulates it. With around 60 gas pedals and incubators, and the same number of coworking spaces, Singapore’s ecosystem is one of the most mature in Southeast Asia. Moreover, opening a startup in Singapore is relatively fast and simple: on average, it takes only two to three days to open a legal entity in Singapore and it can be constituted with a nominal share capital of 1 SGD.

Finally, the Singaporean government grants very interesting fiscal, social and legal advantages:

➤ Companies making less than SGD 100,000 in profits during the first three years are tax-exempt
➤ Singapore's corporate tax rate is capped at 17%, making it an excellent choice for companies concerned about rising tax rates as they increase
➤ Dividends are also distributed to shareholders tax-free, making investors more likely to put their money into startups
starting a startup

Where to locate your startup in Singapore?

Most of the time, entrepreneurs choose to locate their startups close to their customers and opt for “classic” premises where the median monthly rent is SGD 102.44 per sqm in central areas and SGD 44.23 per sqm for peripheral areas. Leases are generally for one or two years. However, there are some areas that are particularly interesting for developing business:

➤ On the one hand, these are the areas where you can find startup accelerators/incubators. These include JTC LaunchPad @one-north and JTC LaunchPad @Jurong InnovationDistrict (CleanTech Park).
➤ On the other hand, there are coworking spaces. Excellent anchors in the ecosystem, they allow people to share a common space and make professional meetings. Some of the best known are: FOUND8, THE GREAT ROOM, WEWOR.

The different forms of companies in Singapore

Representative Office (RO): The representative office in Singapore is a simple but temporary structure (1 to 3 years) limited in its actions and without legal capacity. The sole purpose of the RO is to research and study the market in Singapore and Southeast Asia, and validate the viability of establishing a permanent business entity.

Private Limited Company (Pte Ltd): An independent and permanent legal entity with limited liability of the partners. This legal form allows you to develop your business activities in the region in a sustainable way. It is the most common form of company for the creation of a startup because it can have only one shareholder and the foreign shareholding is not limited.

Branch office: The foreign head office controls the company and is responsible for it. The branch office must offer and develop the same activities as the head office.

Sole Proprietorship: Sole proprietorship, simple to set up and less costly to manage, compared to a company. Registration must be done annually and the business is not a separate legal entity from the owner who is personally liable for all debts and losses of the entity.

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How to found a Startup in Singapore?

For lack of a legal definition of Startup, this entity is simply considered in Singapore as an economic and technological reality but not legal. However, Singaporean law sets a number of conditions to open a Startup.

Choosing the business entity, the company structure

Although there are several options, many new businesses register with the Accounting & Corporate Regulatory Authority (ACRA) as “private limited companies” because of its scalability. In addition, shareholders are not liable for debts and losses beyond their share capital. Designated as such, your company is recognized as a taxable entity.

Registering your corporation with ACRA

In order to incorporate a private limited company, it is necessary to comply with the legislative provisions laid down by the ACRA and the Inland Revenue Authority of Singapore (IRAS).

Benefit from an EntrePass: The EntrePass allows eligible foreigners to start and operate a new business in Singapore. It can be obtained by starting a business in Singapore provided you are an entrepreneur, innovator, or investor. To qualify under any of these three categories, one must:

➤ Be supported by an officially recognized incubator
➤ Have intellectual property
➤ Have done outstanding work in their field of expertise

In addition, to register your startup you must:

➤ Have a company name approved by ACRA
➤ Have at least 1 shareholder
➤ Have a minimum of one Singapore citizen or resident director (To meet this legal requirement, it is possible to appoint a nominee without decision making powers)
➤ To have a secretary general resident in Singapore
➤ Have a registered capital of at least SGD 1
➤ Have a physical address
➤ Have purchased a Business Profile from ACRA. This electronic report details the company's information (registration number, date of registration, shareholders, etc.) This profile will be required to open a corporate bank account, apply for licenses and permits, and verify potential business partners

Foreigners must use an incorporation service for this registration as they cannot register a company in Singapore themselves. Ultimately, the registration documents are signed by the subscribers, then the incorporation (Articles of Association) is automatically generated and finally the BizFile (Kbis) is issued.

Opening a bank account in Singapore

It is possible and not mandatory to open a bank account in Singapore. You can choose from a variety of local and international banks.

Obtaining the necessary documents and following the steps for the registration

Licenses and permits: Some business activities require approval or license from government authorities. Examples include private schools, video companies, travel agencies, liquor distributors, money lenders, banks, financial advisors, daycare centers, and liquor importers, wholesalers and retailers;

Office Hours: It is mandatory to record the address and hours of operation of the office (minimum of three hours per weekday);

Registration Number: The company’s registration number issued by AIDA must appear on all documents used for official business communications;

Customs Registration: If the business involves imports or exports, it is mandatory to register the business with Singapore Customs;

Goods and Services Tax (GST) Registration: The Goods and Services Tax (GST) is a tax on the supply of goods and services in Singapore and on the import of goods into Singapore. You must register for GST if your annual taxable income exceeds S$1 million per year;

Registration with the Central Provident Fund (CPF) of Singapore: The Central Provident Fund or CPF is a compulsory pension fund scheme in which the employer and the employee who is a Singaporean citizen/permanent resident pay a percentage of the monthly salary into the fund.

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The management of employees, partners and directors in a startup

First of all, the Singaporean labor law is favorable to the employer since, if the employee receives a salary higher than SGD 4,500 (about 3,000 Euros), the working conditions are governed by the will of the parties.  However, the employer will have to obtain work permits if he decides to employ foreign workers or colleagues and their families.

The employment act is also flexible since the terms of termination are defined between the parties, the only requirements being notice and the absence of a “wrongful dismissal” (i.e. a dismissal for a discriminatory reason).

Finally, corporate law is not subject to the mandatory rules of other countries, such as French law, which allows for great flexibility. For example, there is no prohibition on unfair terms (a clause that prevents the agreement from being unbalanced in favor of a partner), or the absence of the principle of revocability ad nutum (which allows for compensation to be paid to a dismissed director).

Assistance to the development of a Startup in Singapore

The Singapore government adopts policies that are very favorable to growth and innovation. It provides numerous grants, tax incentives and in-kind support programs to startups. In some select sectors, the government may also subsidize the labor costs of a new business. These benefits are available to both domestic and foreign-owned businesses.

First, there is the Spring SEEDs initiative, which allows startups and investors to also receive money from the government. Second, through the Startup SG initiative, the government provides startup founders with development technologies and equity opportunities.

In addition, Singapore has also promoted an Angel Investors tax initiative, which allows angel investors to receive tax relief of up to 50%. This initiative allows investors to invest in startups with confidence. Finally, the most qualified startups can benefit from Capacity Development Grants (CDG).

Organizations that can help in the development of a Startup in Singapore

In Singapore, many government entities are working to facilitate the creation of businesses.

On the one hand, you can turn to the Accounting and Corporate Regulatory Authority (ACRA) which provides registration services and acts as both a regulator and facilitator.

On the other hand, the Monetary Authority of Singapore (MAS), the Economic Development Board (EDB), SPRING Singapore and International Enterprise Singapore can provide useful information if you want to base your business in the country.